Improving Business Process? - Lessons from GE, Motorola, Apple and General Motors

In my professional journey, one common factor was the buzzwords around process improvement. The rampant and frenzied explosion of process methodology (over 300-400 methodology) and frameworks have not simplified the life of business leaders. In fact, best and most popular Process Methodology (Frameworks) have collectively failed them again and again. In Nov 2014, Chief Executive magazine reported that nearly 90% of the CEO's have failed to meet their target. Nearly, 40 CEOs in the Retail industry (in US alone) are replaced in 2014 that include likes of Walmart, Barnes & Noble, GAP, etc.

You will agree that none of these 40 odd CEOs had any dearth of money to hire and employ the hottest or latest BPM methodologies, etc. That means they must have tried whatever is available in the basket such as Outside-In, Successful Customer Outcome, Six Sigma, Lean Sigma, etc. and still failed to deliver which in turn resulted in their exit from their respective Enterprise.

Improving Process vs Improving Business - GE and Motorola Experience

Let's look at Six Sigma. Six Sigma (wikipedia definition) is a set of techniques and tools for process improvement. It was developed by Motorola in 1986. Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes.

An important factor in the spread of Six Sigma was GE's 1998 announcement of $350 million in savings due to Six Sigma, a figure that later grew to more than $1 billion. In 2005, Motorola attributed over staggering US$17 billion in savings to Six Sigma. Let's look at what happened to Motorola and GE?

In 1999, Motorola Iridium Venture had filed for bankruptcy, making it one of the 20 largest bankruptcies in USA history. Some of the reasons identified were another proof that how mighty and big tend to ignore the fundamentals. A quick look at some of the issues (rentcell.com) will reveal it. Though target customers were changing, they ignored the signals (and evolution of the cellular phone) and continued to focus on the same market segment. Technology limitations, poor operation execution, inadequate marketing and sales, leadership, etc. were other reasons cited for the failure.

August 15, 2011, Google purchased Motorola Mobility for about $12.5 billion and then sold it off to Lenovo for $2.9 billion in Oct 2014. Nearly $10 bn write off within 3 years. What a deal? What's Enterprise value? In fact, I remember reading a note from TrustedReviews which called the company's products repetitive and uninnovative.

In 2010, General Electric (GE), operating in over 100 countries, nearing bankruptcy with a debt pegged at $600 billion (which is is nearly half of annual USA budget). GM was another major proponent of Six Sigma. In fact, Jack Welch made it central to his business strategy at General Electric in 1995. How do we explain the irony of saving $350 million (process brilliance) and creating debt of $600bn resulting in Enterprise bankruptcy? Who has the Big picture? Who can explain this ultimate dichotomy?

General Motors (GM) and Toyota Joint Venture

Another interesting case is General Motors (GM) and Toyota. In fact, together they set up a venture so that GM can learn Toyota's continuous innovation and process improvement.

When GM filed for Bankruptcy in 2009, two reasons were evident. One its inability to change its course quickly on changing market demands. Second but the bigger problem was ignorance of pervasive Enterprise problems for long i.e. systematic failures ignored for long.

Jerome York (GM Board Member), in 2006 spelled out what GM needed to do right. First and foremost was that GE should be realistic about market share and revenue expectations. It must consolidate (cut excess products and brands, sell or close business units that weren't making money). In fact, he went to say that GM must start with "clean sheet of paper approach to the business," looking at everything in the company with fresh eyes.

The problem is not about "mass manufacturing" or "lean manufacturing". In fact, Apple with sales of millions of smartphones and tablets does not own a factory.

What most businesses failed to realize is the concept of "Enterprise" and lack of insight to "Enterprise Anatomy". An Enterprise is like a "living" system, evolving every day. Just like a human being, a normal functioning demands coherent and co-ordinated functioning of all the 13 body systems and the organs. Similarly, hyper performance or excellence in one or two departments are not going to make an Enterprise grow. A co-ordinated and well-integrated enterprise anatomy is essential to make an Enterprise survive and thrive in a dynamic marketplace.

It's important to realize that "Business Processes" (internal, core, support, customer centric, whatever it is, whatever categories you may have...) are important assets of an "Enterprise". Unfortunately, some emotional geeks think "Business Processes" are the only asset of the Enterprise. It's like an eye specialist saying "eyes" are the "only organs" of a body. The situation worsens if someone says "left eye" is best thing for your growth and survival. For nearly 20-25 years, emphasis was on improving processes to "product manufcaturing". In the last 5-10 years, clamour for improving processes related to "customer centricity ". Aren't both equally important? Can "left eye" be less or more important than "right eye"? The real problem is extreme focus on "process" outcome instead of "enterprise" outcome.

Another problem inherent to most process methodology (or frameworks) is in their assumption that "Enterprise Architecture" is subset of "BPM"???? So, if an organization does BPM, Enterprise Architecture is not needed. In fact, I would hear several BPM experts say this for years. Only last 2-3 years reality has dawned, and they realize the need of correcting process in the context of "Enterprise".

The Solution

The solution is simple, think and act "Enterprise". Don't fix your processes in isolation. Don't ill-treat your Enterprise processes by labeling them "internal", "core" or " support" or "customer-centric", etc. Each process is equally important for growth and survival of an enterprise, just as a nerve in the human body.

If you need to support your CEO's new goal of increasing revenue in the next quarter, then you must look inside processes across 10-11 departments such Sales, Marketing, Customer Support, Product development, Product/Service Delivery, Technology Management, HRD, Finance, Account Management, Quality, Operation Management etc. A chage in quarterly business goal might trigger changes in 10-11 critical processes spread over 9-10 departments.

In fact, almost all the cases, Business Process improvements are key to successful strategy execution. Unfortunately, most teams and departments still don't have a solid definition of "structure" of a Business Process. Almost all process improvement methodologies have serious limitations (I will be discussing this in a separate blog).

We found the use of Enterprise Architecture as a solid basis for business process improvement. It helps in creating necessary process primitives. These process primitives can be effectively combined for process improvement. Also, it's critical to visualize process changes across multiple departments to support one more business goals. Using "process primitives", one can quickly combine and create multiple "Target" processes. These "Target" processes are optimized around one or more Enterprise variables (such as time, location, people, data, rules etc.). The process owner or department head must use factors such as cost, resource utilization or execution time, etc. as benchmark for continuous improvement.

In fact, Jeff Bezos (Amazon CEO), #1 CEO if HBR 2014 Top 100 CEO list, 70% business innovation can be achieved by making 20-30% process change. It's important to note that these changes (incremental in nature) are across the board.

In order to realize incremental improvement, it's important to graduate from whiteboard and sticky notes to more advanced techniques such as use of process primitives, simulation, impact analysis, relationship matrix etc. to create or modify your processes. It's important to do the above fast as "time is the essence".

The solution is, let's understand "Enterprise Anatomy". You will agree that any process or process improvement to treat human body disorder will fail in the absence of knowledge about "Human Anatomy". No matter how rich you are, how much money you can spend...if your doctor doesn't understand " your anatomy", treatment will be worthless.

IMHO, in the absence of Enterprise Architecture, improving process is not same as improving business.

I appreciate your time, will await your your feedback and comments in the "comments" section below. BTW, please do share with your network if you like this blog.

In Sweden, steps have been taken to organise cancer processes from a patient/citizen point of view. This work is part of an action research project to gain more knowledge on improvement programmes that take this broad view of health. Process owners have been identified for each of 23 types of cancer. These owners have responsibility for the complete cancer system for their assigned cancer type. In addition, improvement work has begun on two generic subprocesses that span all the cancer types. The adoption of learning mechanisms to foster continual improvement of these processes is crucial.